Samsung Leans on Suppliers to Fix Labor Issues

While it found no instances of underage workers, an audit conducted by Samsung will result in some labor changes at its Chinese suppliers, the company reported Monday. "As companies become increasingly global and leverage manufacturers around the world, it behooves them to make sure they know what those supply chain partners are doing," said Charles King, principal analyst at Pund-IT.

Samsung Electronics will implement new measures to keep its Chinese suppliers compliant with labor laws after it completed a round of audits that found notable problems relating to labor policies, the company announced Monday. These included problems with overtime, but Samsung is also looking to ensure that its suppliers adopt hiring procedures to screen out underage workers.

The company came under scrutiny in August when a labor watchdog group reported that its suppliers in China had hired seven workers under the age of 16. As a result, Samsung conducted on-site inspections at 105 of its suppliers in China, covering more than 65,000 employees.

While it found no underage workers in this recent audit, the company did report what it described as "instances of inadequate practices at the facilities," which included overtime hours in excess of Chinese labor regulations.

"We are now designing, researching, and/or implementing corrective actions to address every violation that was identified. Corrective actions include new hiring policies and work hours and overtime practices, among other steps, to protect the health and welfare of employees," Samsung said.

"This is the problem companies have when doing business in various countries across the globe," said telecommunications analyst
Jeff Kagan. "There are different rules and laws in different countries."

Samsung did not respond to our request for further details.

Global Business Practices

Samsung had been accused by
China Labor Watch of countenancing illegal and even inhumane conditions at its factories in China, and the group noted that the workers' overtime at the facilities could reach or often times exceed 100 hours a month. Under current Chinese law, overtime is limited to 36 hours a month.

Samsung is hardly alone when it comes to having suppliers that skirt labor rules, but it has attempted to resolve these problems quickly. Apple also has come under fire for the practices of its suppliers.

"As companies become increasingly global and leverage manufacturers around the world, it behooves them to make sure they know what those supply chain partners are doing, ensure they are complying with local laws and regulations and treating their employees humanely," said Charles King, principal analyst at Pund-IT. "Why they should do this is because even as the supply chain stretches beyond the direct, day-to-day control of the primary vendor, any evil that happens there can leave an indelible stain."

"Foxconn's actions toward its workers and the well-reported suicides at their factories will follow Apple around for years to come, no matter whether or how quickly the abuses were corrected," King told the E-Commerce Times. "Samsung should be commended for responding so quickly to the September report by China Labor Watch that detailed abuses. The company clearly understands that bad actors, even if they are located thousands of miles away from company headquarters, cast very long shadows."

Quick Response

The fact that the China Labor Watch report was only released in September, and Samsung quickly moved to address the problem also further suggests that Samsung is taking this very seriously.

"Given the heat that Apple has received and Samsung working to be the anti-Apple, Samsung is stepping out to make sure factories building their components aren't mistreating workers," said Rob Enderle, principal analyst at the Enderle Group. "They saw Apple get pilloried, and they have no desire to share that experience."

Samsung also looked beyond what China Labor Watch reported.

"It sounds like Samsung wants to ensure that workers aren't going beyond the legal limits of hours worked, while also ensuring that there aren't underage workers," Enderle told the E-Commerce Times.

It may be that this is as much as a face-saving gesture as much as one of real concern for the workers. It allows the company to fend off public embarrassment and get ahead of a problem that hurt Apple, Enderle noted.

"No one wants to explain to their board, spouse or children why they are mistreating people -- even by proxy," Enderle stressed.

Cleaning Up China

Given that China doesn't have its own William Jennings Bryan to address workers' rights, it will likely fall to companies such as Samsung to ensure that labor practices are maintained and enforced as well. It is also sadly an issue that is hardly limited to China.

"Illegal labor practices like long hours and inhumane conditions occur in many countries around the world," Kagan told the E-Commerce Times. "This is like what the United States' workers dealt with 100 years ago."

However, while Bryan may have seen the giant companies in America as being a plague on its workers' rights, Samsung's size gives it the power to enforce how suppliers in places like China may operate.

"It's been many years and the problem still is not solved. Samsung is a global company, so every other company they do business with, in every other country, must rise to the top or it will cost them," said Kagan. "Samsung isn't the first company wrestling with this problem, and they won't be the last. We hear countless stories like this every year in industry after industry."

While Samsung can try to crack down, and even inspire other companies such as Apple to respond in kind, this is likely something that won't be solved quickly.

"The bottom line is we have little power in other countries," admitted Kagan.